NCUA Calls For Return Of Member Equity InCU Conversions
WASHINGTON - (06/14/05) -- NCUA Chairman JoAnn Johnson followedup on criticisms lodged by members of Congress last week with aletter to a key lawmaker asking Congress to require that a creditunion's net worth be distributed to members afterconversion--similar to what is required in the demutualization ofinsurance companies. Johnson urged that lawmakers, who werecritical of the agency's efforts to invalidate the ongoingconversions at Community CU and OmniAmerican CU, note the vastfinancial benefits top managers and directors have earned afterconverting their credit unions, first to mutual savings bank, thento stock form. "If Congress further restricts NCUA's alreadylimited authority over these conversion votes, the only disclosuresmembers receive, when asked to support a structural change that mayresult in the loss of their ownership of the institution's capital,will be disclosures from the individuals who stand to benefitmost," said Johnson in a letter to Rep. Spencer Bachus, chairman ofthe House Financial Services subcommittee on FinancialInstitutions. A conversion to a mutual savings bank, then stockform, by a credit union with $50 million in member capital, couldresult in free stock grants of more than $10 million over fiveyears for the CEO, and an additional $10 million of free stock tobe shared by the directors, according to Johnson. NCUA's action toinvalidate the conversion votes at the two Texas credit uniongiants came under fire during Johnson's testimony on regulatoryrelief before the subcommittee last week, with one lawmaker callingthe actions "re-freaking-diculous".